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Alibaba Quarterly Results Beat Expectations, With Entertainment Up 6%

China’s Alibaba Group posted stronger earnings than expected in its first financial quarter thanks to growth in its core e-commerce and cloud computing sectors, reporting Thursday a 42% rise in quarterly revenue.

Revenue rose to RMB114.92 billion ($16.3 billion) in the quarter ending June 30, up from last year’s RMB80.92 billion ($11.5 billion). Analysts had predicted revenue of RMB111.73 billion ($15.9 billion), Reuters said.

Alibaba has expanded its user base to 674 million annual active consumers, and will “continue to expand our customer base, increase operating efficiency and deliver robust growth,” Alibaba Group CEO Daniel Zhang said. The firm has hit 755 million monthly active mobile users as of June, an increase of 34 million from the March 2019 figure.

The New York-listed conglomerate’s digital media and entertainment sector encompasses the operations of firms such as streaming platforms Youku and Tudou, film company Alibaba Pictures, Alibaba Music, and the Damai ticketing platform, among others. The sector accounted for just 5% of Alibaba’s overall revenue in the quarter ending June 30.

Digital media and entertainment revenue in the quarter grew 6% year-on-year, “primarily due to our consolidation of Alibaba Pictures,” the firm said. Adjusted EBITA in the sector was a loss of $325 million (RMB2.2 billion). Average daily Youku subscribers during the quarter grew 40% year-on-year.

While we continue to invest in original content production capabilities, which gives us better control over content quality, format and scheduling, we are also taking systematic analytical measures to ensure content cost efficiencies and return on investment,” the company said in a statement.

Alibaba Pictures has its own share listings in Hong Kong and Singapore. Parent group Alibaba regained majority control through a special share issue in the previous financial year. In December, Youku’s former president Yang Weidong was arrested and put under investigation for corruption.

Meanwhile, cloud computer saw the greatest growth, with a 66% year-on-year increase in revenue to RMB7.79 billion ($1.13 billion), mostly thanks to a rise in average revenue per customer. Revenue from its core commerce business rose 44% to RMB99.54 billion ($14.1 billion). Net income attributable to ordinary shareholders was RMB21.25 billion ($3 billion).

Assessing the overall report, analyst Neil Campling at Mirabaud Securities told Bloomberg News that the “key standout for us is that Alibaba’s China commerce business grew 40%, close to twice the rate of the China online retail industry.” He added: “The scale benefits are paying off and Alibaba is enjoying both active consumer growth momentum and higher average spend.”

CEO Zhang is expected to replace Alibaba founder Jack Ma as chairman of Asia’s largest company in September.

Looking to raise more capital, the group has also been mulling a secondary listing in Hong Kong, a move with a timely appeal given the ongoing US-China trade war and the potential for increased scrutiny of Chinese firms stateside, particularly in the technology sector. Reports say Alibaba may have already quietly filed for a Hong Kong stock listing, but recent widespread and increasingly rancorous anti-government protests there may have put the move on ice.

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